Self-Employed Professional Taxes in the Philippines

Self-Employed Professional Taxes in the Philippines

Licensed professionals (CPAs, doctors, lawyers, architects, engineers, nurses in private practice) who go independent face BIR registration and an important tax choice. Tax rules change, so confirm the current forms, rates and deadlines on bir.gov.ph or with your Revenue District Office (RDO), and consider an accountant for your first year.

Registering with the BIR

When you start practicing on your own:

Steps

1. Get a TIN if you don't have one
2. Register as a self-employed professional with BIR Form 1901 at the RDO where you live or practice, or online through the BIR's registration system
3. Choose your income tax option:

- Graduated rates, with itemized deductions or the Optional Standard Deduction (OSD) - 8% income tax, if you qualify

1. Register your invoices. Printed invoices need an Authority to Print; you can also use a registered computerized or electronic invoicing system
2. Register your books of accounts
3. Get a Mayor's Permit (business permit) from your city or municipality

Under the Ease of Paying Taxes Act (RA 11976, 2024), the invoice is now the primary document for sales of services (it replaced the official receipt), and the ₱500 annual registration fee was abolished.

The big choice: 8% or graduated rates

The 8% option

• 8% of gross receipts and other non-operating income, minus ₱250,000 (the ₱250,000 reduction applies only if you have no salary income)
• Replaces both the graduated income tax and the 3% percentage tax
• No deductions
• Only if your gross receipts don't exceed ₱3 million and you aren't VAT-registered
• You choose it in your first quarterly return of the year (or at registration), and it holds for the whole year. If your receipts pass ₱3 million during the year, you're moved to graduated rates

Graduated rates

• Income tax from 0% to 35% on taxable income; the first ₱250,000 a year is tax-free
• Deduct your actual business expenses (itemized), or take the OSD of 40% of gross receipts without proving expenses
• Plus 3% percentage tax on gross receipts if you're not VAT-registered
• More record-keeping

Worked numbers

For a purely self-employed professional who isn't VAT-registered, using the current tax table (effective January 1, 2023):

With itemized deductions, graduated rates only come out ahead when your real expenses are a large share of your receipts. For example, at ₱1,000,000 in receipts, graduated rates plus percentage tax beat the 8% option only once deductible expenses exceed roughly 56% of receipts.

Takeaway: for most professionals with modest expenses, the 8% option costs less. Graduated rates make sense for practices with heavy costs (office rent, staff, equipment), so run both calculations with your own numbers.

If you also earn a salary, your salary is taxed at graduated rates, and the 8% option (if you choose it) applies to your professional income without the ₱250,000 reduction.

Filing deadlines

Income tax

• 1st quarter: BIR Form 1701Q, on or before May 15
• 2nd quarter: 1701Q, on or before August 15
• 3rd quarter: 1701Q, on or before November 15
• Annual: BIR Form 1701 or 1701A, on or before April 15 of the following year

Percentage tax (graduated option, non-VAT)

• BIR Form 2551Q, within 25 days after the end of each quarter

VAT (if VAT-registered)

• BIR Form 2550Q, within 25 days after the end of each quarter (VAT is now filed quarterly, not monthly)

Withholding tax (if you have employees or pay suppliers)

• Compensation withholding: BIR Form 1601-C monthly
• Expanded withholding on suppliers and contractors: BIR Form 1601-EQ quarterly
• Annual information returns (1604-C and 1604-E)

Tax withheld by your clients

Companies and other withholding agents usually withhold tax on professional fees and give you BIR Form 2307. Keep every 2307: you credit that tax against your quarterly and annual income tax.

Common deductible expenses

If you choose graduated rates with itemized deductions:

• Office rent and utilities
• Office supplies and equipment
• Professional dues and subscriptions (for example, your accredited professional organization)
• Continuing Professional Development (CPD) costs
• Travel for client work
• Professional liability insurance
• Phone and internet (business share)
• Computer and software
• Vehicle expenses (business share)
• Staff salaries

Keep invoices and receipts for every expense you claim.

Common mistakes

Registering late

Practicing without BIR registration leads to back taxes, surcharges, interest and penalties.

Mixing personal and business money

Use a separate bank account and card for your practice.

Missing quarterly returns

Late or missed returns bring surcharges, interest and compromise penalties, on top of the tax itself.

Choosing without doing the math

You can only choose the 8% option at the start of the year, so run the numbers before your first quarterly return.

Poor records

BIR audits need invoices, receipts and books. Keep organized digital and paper copies.

Getting tax help

An accountant or bookkeeper often pays for themselves:

• Fewer penalties
• A better choice of tax option
• More of your time for paying work
• Support if the BIR audits you

Get quotes from a few, since fees depend on how complex your practice is.

The VAT threshold

Once your gross receipts go above ₱3 million a year, you must register for VAT:

• 12% VAT on your fees
• You can claim input VAT on your purchases
• Quarterly VAT returns and more record-keeping
• The 8% option is no longer available

Some professionals keep receipts under ₱3 million to stay non-VAT, but growing past it is often the right business decision.

Savings and retirement

With no employer, you pay your own contributions:

• SSS as a self-employed member: 15% of your chosen monthly salary credit (₱5,000 to ₱35,000), so ₱750 to ₱5,250 a month
• PhilHealth as a direct contributor: 5% of monthly income, from ₱500 to ₱5,000 a month
• Pag-IBIG: both shares, ₱400 a month at the standard ₱10,000 salary cap, or more if you choose
• PERA for tax-advantaged retirement savings: up to ₱200,000 a year with a 5% tax credit (see PERA explained)
• Your own investment portfolio

For accountants going independent

For accountants, the CPA license is the foundation of an independent practice, and the tax and business law subjects of the CPA board exam feed directly into advisory work. See the CPALE guide for how the exam works.

Where Super Tutor fits

CPALE is coming soon to Super Tutor; there's no CPALE reviewer in the app yet. See every exam Super Tutor covers now.

What to read next

• Big 4 CPA hiring in the Philippines
• Filipino accountant career path
• Filipino freelancer financial planning

Sources: BIR Form 1701Q (8% option, OSD and income tax table effective January 1, 2023); National Internal Revenue Code as amended by TRAIN (filing deadlines, ₱3 million VAT threshold; 3% percentage tax from July 1, 2023 after CREATE's temporary 1%); Ease of Paying Taxes Act (RA 11976) and RR 7-2024; SSS contribution schedule (sss.gov.ph); PhilHealth premium table (philhealth.gov.ph); Pag-IBIG Circular 460; BSP PERA FAQs.